Opinion
Argued April 13, 1885
Decided May 5, 1885
Preston Stevenson for appellant.
N.B. Hoxie for respondent.
The questions upon this appeal relate to the liability of the defendant on a contract of reinsurance made by it in favor of the Paterson Fire Insurance Company, and are, first, whether it was obtained by misrepresentation, and so void ab initio, and if not, then second, whether the action is barred by a limitation clause contained in the contract.
The facts agreed upon, or found by the trial court, so far as material, are these: The Paterson Company, on the 14th of August, 1876, at San Francisco, undertook to insure one E. Sherwood against loss by fire to the amount of $4,500, as follows: "$3,000 on his one and one-half story, hard-finished, frame, boarding-house building * * * and $1,500 on furniture, etc., contained in it." On the next day its agent addressed to the defendant a written application, saying: "Reinsurance is wanted by the Paterson Fire Insurance Company for $1,500, from August 14, 1876, to August 14, 1877, on their interest as insurers, under their policy No. 582, issued to E. Sherwood * * * covering $4,500, viz.: $3,000 on his one and one-half story, hard-finished, frame, boarding-house building * * * and $1,500 on furniture," etc., "contained therein." The application was granted, and the defendant issued its policy, which recited that "The St. Paul Fire and Marine Insurance Company of St. Paul do reinsure" the Paterson Company "against loss or damage by fire to the amount of $1,500 on their interest as insurers, under their policy No. 582, issued to E. Sherwood," and then follows in the language of the application, a statement as to the amount and distribution of insurance and description of the property insured under that policy.
Upon the trial it was admitted that in 1876 "a fire occurred and destroyed the property insured in policy 582 to the amount of $4,100." The Paterson Insurance Company declined paying. They were sued and, after notice to the defendant of the claim made and pendency of the action, a trial was had and judgment obtained against them for the amount claimed, with costs. The plaintiff was subsequently appointed receiver of the property and assets of the Paterson Company, and brought this action to recover the amount due according to the terms of reinsurance. Before the trial court he succeeded. The General Term, however, reversed the judgment, and the respondent seeks to sustain that decision upon grounds involved in the questions above stated.
First, as to misrepresentation: It was admitted upon the trial that Sherwood's "house was hard-finished on the lower story, but the rooms and hallway composing the upper or half story were cloth lined and not hard finished"; but notwithstanding this the court found that the general character of the building was correctly stated in both policies. It is quite unnecessary to consider whether the interior finish of the building would warrant the epithet applied to it, for as to that there was in our opinion no representation by the Paterson Company. They had no property-right in the subject insured by them, but by underwriting the policy rendered themselves liable to loss from fire, and they thereby acquired an insurable interest to the extent of that liability, but it was in relation to the peril only, against which they had insured. It is that to which their request for reinsurance applies. By it they in effect say, as insurers, we have undertaken to carry a risk which, as taken by us, is as follows: "It amounts to $4,500, and we ask indemnity against a portion of it." It is not pretended that they did not state the risk literally as they had taken it, and it was in fact described in their policy in terms similar to those used in the policy of reinsurance. The case may indeed be taken in like manner as if they had exhibited to the defendants the original policy, and the defendants had indorsed upon it an assumption of the risk of $1,500. In either way — by indorsement or by a new writing — they become charged with so much of the amount as the Paterson Company had put in jeopardy, and to that extent were bound to relieve it. The original contract of insurance remained as at first, and the reinsurer came under no contract obligation to the owner of the property described in it. The subsequent act of the insurer did not create any. Its own risk was the sole object of reinsurance and formed the consideration of a new and independent contract; distinct from and unconnected with the original insurance. This is so stated in the policy of reinsurance. It covers in terms the plaintiff's "interest as insurers" under their policy; and that alone is made the subject-matter of insurance.
When, therefore, the Paterson Company was found to be legally liable upon its contract and the amount was ascertained, it was not open to the reinsurer to inquire into the merits of those questions. They were at once bound to pay the reinsured such a proportion of the loss as their reinsurance bore to the sum originally insured.
The other objection rests upon a clause in the policy which provides that no action "for the recovery of any claim, by virtue of this policy, shall be sustainable in any court of law or chancery until after an award shall have been obtained fixing the amount of such claim in the manner above provided, nor unless such suit or action shall be commenced within twelve months next ensuing after the loss shall occur." This clause formed part of a blank form intended as an ordinary contract of insurance where the assured had an interest in the property, was required to make proofs of loss by fire, and submit his claim to arbitrators if required, and fulfill many other conditions in no respect applicable to a case where the perils of a contract of primitive insurance only are involved, and where the loss or damage is the amount of liability under it. Such is the contract under which the plaintiff claims, and his right to recover is unaffected by the stipulations.
It follows that the order of the General Term should be reversed and the judgment of the Special Term affirmed, with costs.
All concur.
Order reversed and judgment affirmed.